If use of excess leverage over the last 5 years created GDP growth of 3-4% what can can we expect without any use of excess leverage??? Once we experience the slightest turn around in our economy we are going to see oil prices and commodities surging, higher interest rates and extreme threat of inflation, how can we possibly experience any growth in our economy with this being a factor. According to our monopoly money printing friend bernanke he says: WASHINGTON -(Dow Jones)- Federal Reserve Chairman Ben Bernanke told a group of Senate Republicans Tuesday that he expects the nation's gross domestic product to grow 2% in 2010, followed by 4% growth in 2011, according to a senator who attended the meeting.
What lack of excess leverage are you talking about? FHA loans let you put down practically nothing. The government subsidizes that. Fannie mae rates are at 4.4%. And last I checked, PPIP, TALF, etc. all provide additional leverage. There's plenty of credit and leverage to go around.
Most growth in the last 8 years has been nominal = inflationary. The simultaneous debt/outsourcing-bubble has masked a crumbling America devoid of manufacturing and real productivity. The much-lauded "New Economy" weighs heavily on real estate and stock market speculation, huge leverage, debt products, derivatized crap, and cheap imports. Leverage and paper gains made Americans appear much richer than they were... The next bubble will be larger and more destructive than the last (they always are). Derivatives will not be regulated to the underlying. Reinflation will only insure a larger swath of private wealth (corporate and consumer) gets suckered into the next bubble - be it commodities, real estate, equities, whatever. When the sheep realize their fictional gains were built on sand, the market will have already tanked evaporating XX Trillion more than last time. Look what happened this time - 13 Trillion in handouts, a hamstrung consumer, 10% GDP contraction, S&P cut in half. This one will seem like a walk in the park. Next time, the dollar will collapse, along with everything else. We need to abolish fractional reserve banking and create a debt-free currency. Greater Depression in 8 years, or less.
I'd bet not 1 in 1000 understands this. In fact, if the TRUE inflation rate had been reported, we might have actually been in recession for the last 5 years or so! Recession meaning, "reduced UNITS of manufacturing and service output"... (The government reports GDP in terms of "PRICES of finished goods"... which includes a healthy dose of inflation which they always understate.)
Thats right. Greenspan was hired to get Americans behind the export of their own jobs, with cheap money, debt and the illusion of "growth" so that they would be fooled into the belief that free-trade was a "good deal". Greenspan is a modern-day Judas Iscariot. Now, the bloom is off the rose, the American economy is in worse shape than it was before, and the only solution - according to Bernacke - is to reinflate another bubble. Imagine, 13 Trillion in derivative losses AND COUNTING. Next go, total losses might be 30 Trillion. Then, the dollar collapses along with America and the Global Economy. Interesting, no company or corp has reported anywhere close to 13 Trillion in PROFITS. So to whom is the 13 Trillion in bailout money being paid? Are we to believe banks have no counter-party on their losing trades???
The real question I ask myself is, what will be the next catalyst for a move down? Mark to market is over so they don't ever have to take their losses. Huge losses transferred from the banks to the taxpayers. Virtually unlimited cash guarantees from the fed. Anytime they will do poorly the fed will recapitalize them somehow by giving them free capital. So whats the catalyst? How can i say "i lost" if I am trading an account that is backed by unlimited money and I don't every have to take a loss? My losses will be subsidized by the taxpayers so how can I lose? How can the market ever go down again? I figure we've come all this way and nothing has changed. Banks are all still doing what they were doing. The same people are all still in power. The only thing thats changed from 2 years ago is a couple of trillion of debt that the taxpayers have to pay. Rates this low for so long, and we couldnt make anything happen. Who are we kidding. For everyday the market is up, the dollar is down. The dollar will eventually collapse or the govn't will go bankrupt. The dollar could fall by 30% from here and it would take a few years. We had inflation for the last 10 years and the CPI was always normal so if inflation will be the catalyst, it will be WAY down the road when its too late. House prices tripling? No thats not inflation. Them dropping is deflation though..And catastrophic. So any ideas? What could take us down?
The usual suspects, geopolitical risk from oil, and terrorist attacks with nuclear or chemical weapons. I consider 9/11 equivalent to a nuclear weapon as it had nearly the same destructive force of one.